USD/CHF settled near 0.7960 during the early European session on Monday. However, the pair’s potential upside may be limited as markets turn cautious ahead of key economic data later this week. US employment reports for October and November are due on Tuesday. US CPI inflation data will be released on Thursday.
Expectations that the US Federal Reserve (Fed) will implement further interest rate cuts in 2026 are weighing on the US dollar (USD) against the Swiss franc (CHF). The summary of economic forecasts, or so-called “dot chart”, indicated average expectations of an additional Fed rate cut next year. Meanwhile, the Swiss National Bank (SNB) has kept interest rates at 0% and is expected to maintain this position for an extended period to manage inflation.
Traders are turning cautious and bracing for key US economic data later this week. US non-farm payrolls data for October and November, delayed by the US government shutdown, is due on Tuesday. A risk-free market environment could support a safe-haven currency such as the Swiss Franc (CHF) and act as a headwind for the pair.
“From the perspective of policymakers… this set of data, whatever the outcome, they will probably interpret it more carefully than usual,” said Sim Moh Siong, currency strategist at the Bank of Singapore. “The main thing you want to do is explore the trend in terms of the US labor market.” Traders will be watching these reports closely, as they may provide some hints about the health of the labor market and the path of US interest rates. In the event of a stronger than expected result, this could lead to an increase in the US dollar against the Swiss franc in the near term.
Frequently asked questions about the Swiss franc
The Swiss Franc (CHF) is the official currency of Switzerland. It is among the top ten most traded currencies in the world, with its volume exceeding the size of the Swiss economy. Its value is determined by broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss franc was pegged to the euro (EUR). The peg was suddenly removed, causing the value of the franc to rise by more than 20%, causing turmoil in the markets. Although the peg is no longer in effect, the fortunes of the Swiss franc tend to be highly correlated with the euro due to the high dependence of the Swiss economy on the neighboring eurozone.
The Swiss Franc (CHF) is a safe-haven asset, or the currency that investors tend to buy during times of market stress. This is due to Switzerland’s perceived status in the world: a stable economy, a strong export sector, large central bank reserves or a long-standing political stance towards neutrality in global conflicts, making the country’s currency a good choice for risk-averse investors. Turbulent times are likely to strengthen the value of the Swiss franc against other currencies that are seen as riskier to invest in.
The Swiss National Bank meets four times a year – once every three months, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or expected to be above target in the foreseeable future, the bank will attempt to tame price growth by raising the interest rate. Higher interest rates are generally a positive for the Swiss Franc (CHF) because they lead to higher returns, making the country a more attractive place for investors. Conversely, low interest rates tend to weaken the Swiss franc.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can influence the valuation of the Swiss franc (CHF). The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or central bank currency reserves would lead to movements in the Swiss franc. In general, high economic growth, low unemployment and high confidence are good for the Swiss franc. Conversely, if economic data indicates weak momentum, the value of the Swiss franc is likely to decline.
As a small and open economy, Switzerland is highly dependent on the health of neighboring economies in the eurozone. The wider European Union is Switzerland’s main economic partner and a key political ally, so the stability of macroeconomic and monetary policy in the euro area is essential for Switzerland, and therefore for the Swiss franc (CHF). With such a dependence, some models suggest that the correlation between the fortunes of the euro (EUR) and the Swiss franc is over 90%, or close to perfect.
